Crude petroleum refinery exemption upheld for a phased expansion that created an independent stand-alone refinery.

Imported goods were held eligible for exemption under Notification No. 11/97-Cus. for setting up a crude petroleum refinery because Phase II was shown to create an independent stand-alone refinery with separate facilities capable of independent operation. The distinction urged between "initial setting up" and "substantial expansion" was not treated as decisive, as the notification used only the expression "setting up Crude Petroleum Refinery" and was construed liberally to promote industrial activity. On that reading, phased establishment of an additional refinery was not excluded, and denial of the exemption was unsustainable.

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Issues: Whether the imported goods were entitled to exemption under Notification No. 11/97-Cus. for setting up a crude petroleum refinery, where the assessee had already an existing refinery and the dispute was whether Phase II amounted to setting up an additional refinery or only substantial expansion of the existing unit.

Analysis: The evidence, including governmental clarification and technical certifications, showed that Phase II brought into existence an independent stand-alone refinery with separate facilities capable of independent operation. The notification used the expression "setting up Crude Petroleum Refinery" and did not qualify it by adding the word "initial". The distinction sought to be drawn by the Revenue between "initial setting up" and "substantial expansion" was therefore not decisive. An exemption notification intended to promote industrial activity had to be construed liberally, and phased establishment of a refinery was not inconsistent with the language used in the notification. The existence of an additional refinery in phases did not stand negated merely because the expansion was substantial in scale.

Conclusion: The imported goods were eligible for the exemption, and denial of the benefit was unsustainable.

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